Agri-inflation increases in third quarter of year

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WINDHOEK – The Production Cost Index of the Namibia Agricultural Union (NAU), which determines the price paid by producers for a basket of inputs used on the farm, currently puts the annual agri-inflation rate at 2.40% for the third quarter of the year.

The increase was caused by a 20.01% year-on-year increase in fuel prices. Fuel price is expected to have a further impact on agri-inflation because of a 40 cents per litre increase in fuel introduced at the beginning of September. The Namibia dollar has also weakened against the US dollar, which is anticipated to increase prices of imported products, and thus also influence agri-inflation.

The agricultural sector is constantly required to improve productivity, through cost savings, improved fertility and rangeland management, among others, to maintain profit margins. During the past 13 years, cattle producers have been required to improve efficiency by 4.71% per year to survive financially. The current situation has unfolded in the wake of the African Development Bank’s Outlook for 2018 urging southern African countries to start the policy agenda for regional industrialisation by recognising the realities of markets, competition, and competitiveness. “The policy agenda for regional industrialisation needs to start from recognising the realities of markets, competition, and competitiveness across Southern Africa — including concentration, vertical integration, and market power. In processed food products, large firms have operations extending across the region, linked into global value chains and international production systems,” the report states.

The bank says concrete policy measures are required for a stepwise change in food production, to address the trade deficit and move toward net exports through industrialisation along the value chains. The main recommendations are:
• Address fertiliser pricing and supply by shutting down export cartels, opening access to port facilities to a wider range of fertiliser traders, reducing inland logistics costs and collusion in trucking, and investing in local production such as the planned plant using natural gas in Tanzania;

• Set up a market observatory to track the prices of agricultural inputs, commodities and food products so that regional competition authorities, such as the COMESA Competition Commission, can identify cartels and provide information to farmers to negotiate with traders and other large buyers;

• Enhanced access to information will also assist potential entrants in identifying market opportunities;
• Build the industrial capabilities of suppliers through development finance, advisory services, and assistance in meeting standards and certification of agro-processing and food processing companies. This needs to include establishing effective regional industrial policy institutions in these areas, leveraging existing cross- country partnerships;
• Target the competitiveness requirements of specific value chains, and pay attention to the cross-border nature of these value chains. Urgently required in prioritising interventions is anticipating the changing demand patterns from urbanisation and population growth and the potential for import replacements;

• Improve packaging, a key requirement for making processed food products competitive in urban consumer markets. Centres of excellence can provide facilities to food companies to design and specify packaging, especially if packaging companies have incentives to locate plants in food products clusters;

• Provide a regional code of conduct for supermarkets, local supplier development commitments, advice on packaging and branding, and logistics to strengthen two-way trade. Both Namibia and Zambia are putting in place measures to increase local procurement by supermarkets, but a regional code can be developed that is consistent with strengthening regional value chains and with the reality that supermarkets are integrating the region.